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How to Know When to Make an Insurance Claim

Apr 28th, 2021 • Kristen A.

Though it’s obviously necessary, I’m not a fan of insurance. If you have the desire (and the cash to pay the premium) you can insure literally anything. The car you drive, the home you live in, the jewelry you wear, they can all be protected by an insurance policy. This protection can extend beyond the more traditional as well. Celebrities have been known to insure their hair, smiles, and even voices. Personal chefs have insured their taste buds. The list goes on and on. As you’re reading this I don’t assume you insure your body parts. However, it’s likely you insure several other aspects of your life, like your apartment. 

The majority of the people I know rent. For many, especially in the city where we live, renting makes the most economical sense. If you’ve ever been a tenant you might be able to empathize with the fear that sometimes accompanies a move-out inspection. Trust me, I’ve been there. I feel as though I’ve never moved into a clean apartment (and I’ve lived in 7). But, I also have regularly been charged for a cleaning upon my departure. There is a charge I find more common than a cleaning fee: carpet repair/replacement.

At my last apartment upon move out a contractor would pull the carpet from the floor and check the underside and carpet pad for stains. If a stain was found, the entire room would be replaced. I heard horror stories of thousands in damages charged upon move out. After a few months in my community I learned that many planned to pay for these fees with their renters insurance policy. In fact, I knew many families who purchased renters insurance for this reason alone. I’m here to tell you why making small (in the grand scheme of things) claims on your insurance might not always be in your best interest.

Did you know your insurance company can choose to not renew your policy?

This is true of all insurance lines. Too many car accidents? A few too many speeding tickets? You might be dropped from your auto policy. Too much storm related damage? You could be dropped from your homeowners insurance. The reality is you could find yourself searching for a new company upon renewal if your insurer finds you to be too high risk. 

Claims can also increase your premium.

Your insurer reserves the right to change the rate you pay if you make an insurance claim. Unfortunately, for us as consumers, we cannot be sure if or how much we can expect our premium to rise as a result of a claim. In fact, claims can even impact the ability for a property to be insured. As the owner of a property your claims history can impact the ability for a buyer to obtain insurance when you someday sell the home. 

So when should you file a claim? 

Unfortunately, there aren’t specific guidelines for when it makes sense to make a claim on your insurance. There are a few times where it might be best to cover the expenses out of pocket. If the damage is barely beyond your deductible, it might be best to avoid the claim. You’ll have to pay the deductible first so the dollars up to the deductible are a loss either way. It might be worth it to pay the remainder as well instead of risking the increase in premium. 

A car insurance claim might not make the most financial sense if you insure many vehicles and/or drivers. A married couple with two teenage drivers already pays a hefty premium. If one of those teenage drivers takes out the neighbors mailbox paying to replace the mailbox and repair the vehicle probably makes more financial sense than making the insurance claim. An increase in premium might be felt on all of the insured vehicles. 

Obviously we can’t know when we will need to make a claim on our insurance. But you can ensure you have options if you have damage to your home, car, or apartment. If, for example, you rent an apartment, start saving for potential move out charges. If you have pets, there’s a good chance you’ll need to pay to replace the carpet. Determine how much you might have to pay out of pocket and divide this amount by the number of months you’ll occupy the space. Begin to put this amount in savings monthly. Then, when it does come time to vacate the unit you’ll have options for paying the cost of any move out expenses.

For help working through these kinds of questions, start your $19.99 a month Hey Money subscription today! Our experts can help you weigh the pros and cons of filing a claim by taking a look at your policy and your other financial priorities. Learn more here.

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